J.C. Penney Finally Makes Same-Store Gains
By Anna Rose Welch, Editorial & Community Director, Advancing RNA
Company reinstates sales events, invests in new holiday advertising campaign to restore consumer and analyst faith in J.C. Penney
As a result of improving demand for home products, men’s apparel, and women’s accessories, J.C. Penney posted the first gain in monthly sales in almost two years. Over the past year, the company has been implementing new strategies and raising money to fund a turnaround. After raising roughly four billion through borrowings and a share offering, the company said yesterday sales at stores open at least 12 months rose 0.9 percent in October — the first monthly sales gain since December 2011.
The company has had lots of negative attention recently because of its diminishing sales brought about by problematic business strategies. For instance, when former CEO, Ron Johnson, took charge, his strategy to replace all sale coupons with everyday low prices got lots of negative attention from analysts and customers. For J.C. Penney and other retailers, coupons often hype consumers’ emotions, and many customers felt that eliminating coupons took away some of that excitement. Some experts claimed that this strategy cannot work for retailers that carry products that can also be found in Macy’s, Kohl’s, Wal-Mart, and Target, among others. Sales and coupons only worked to increase attention and excitement about product offerings in J.C. Penney stores, and eliminating them only led to a sharp decrease in business.
However, since his reinstatement as CEO following Johnson’s departure, Myron Ullman has been trying a number of tactics to encourage a sales turnaround. Some of these efforts include reinstating sales events, and reviving attention to private-label brands including St. John’s Bay, while also clearing out slow-selling merchandise. Ullman says, “We are focused on restoring a compelling mix of private, exclusive, and national brand merchandise that better resonates with our customers and results in fewer markdowns at the end of the selling season.”
Regardless of shaky profitability so far in Q3, the chain says it expects to have more than $2 billion in cash and other liquid assets at the end of the year. Similarly, during the second quarter, online sales were up 10.8 percent year over year. While analysts are hesitant to declare the turnaround a complete success, one Macquarie Capital analyst, Liz Dunn, says in a note that it looks as though J.C. Penney “is on track with the turnaround and key strategies such as restoring promotional pricing and increasing stock of private brands and basics are beginning to work.”
With the holiday season just around the corner, J.C. Penney is also making improvements to its marketing strategies. Several months ago, the company hired former Kraft Foods exec, Deborah Berman, as its senior VP of marketing. Recently, Berman held an agency pitch for a new holiday campaign, selecting Michigan-based Doner to replace WPP’s Y&R. Berman notes specifically that she is familiar with Doner’s work on other turnaround situations, including the Chrysler Group. According to Berman, “I was attracted to their simplicity and strategic thinking and their connection to our customers. There was no gap whatsoever in understanding that target.” While this new appointment occurred less than two months before Thanksgiving, the marketing dates have not been pushed back; in fact, the campaign will kick off two weeks earlier than planned.
Overall, the company is concerned with restoring traffic levels and faith in the retailer. Berman says: “The critical thing in a turnaround related to marketing is traffic, and we say our first, second, and third objective is traffic… There’s no friction between this is branding and this is promoting. It’s all about a broad tool kit that does both, because that’s what the business challenge requires to restore faith and footsteps in J.C. Penney.”
Click here to see how pricing figures into 2013 holiday plans.